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The Secret of Wealth Preservation - Jeff Nielson (10/1/2017)

The Secret of Wealth Preservation - Jeff Nielson (10/1/2017)
By Jeff Nielson 4 years ago 32116 Views 6 comments

January 10, 2017

We have a failure to communicate. The vast majority of the investment public in the Western world has no understanding – at all – about how to preserve and protect their wealth. Of the minority of the investment community with some understanding of wealth preservation, almost invariably it is a flawed understanding.

Understanding wealth preservation begins with having a detailed and correct understanding of “money”. Understanding money begins with correctly comprehending the difference between money and (mere) currency. Currency is merely a medium of exchange. It serves no other function and implies no other properties/qualities. What we have in our wallets is mere (fiat) currency.

Money, on the other hand, is a store of value – meaning it preserves and protects our wealth. A simple historical example illustrates this principle. Two thousand years ago during the Roman Empire; with a 1-oz gold coin, a gentleman of that era could purchase the finest suit of clothing: a high-quality toga, belt and sandals.

Five hundred years ago; with a 1-oz gold coin a gentleman of that era could purchase the finest suit of clothing: a tailor-made suit and accessories. Today, with that same 1-oz gold coin, we can still purchase a suit and accessories, but because of the extreme manipulation of the gold price, we are (temporarily) forced to buy our clothing “off the rack”.

That’s two thousand years of (perfect) wealth preservation for the holder of money. Understand that the same math holds true with silver. Until the last century, the gold-silver price ratio was fixed at 15:1. It’s only over the last hundred years that the bankers have been able to completely skew silver prices – at a cost of burning through 4,000 years of silver stockpiles .

Then we have our paper currencies. In the just-over 100 years in which the Federal Reserve has had the statutory responsibility of “protecting the dollar”, the U.S. dollar has lost 99% of its value. This is actually an understatement, since the dollar today is fundamentally worthless, and only maintains any value at all through the constant manipulation of the convicted currency manipulators , the West’s Big Banks (i.e. the One Bank ).

Money provides eternal wealth preservation. But with ‘leaky’ currency, our wealth can dissipate to zero, over the course of a single lifetime. How? Why don’t we ask Sir Alan Greenspan?

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.

- Alan Greenspan , 1966

When we had a gold standard, we had money, and our wealth was safe and secure. Robbed of our gold standard by the despicable Paul Volcker , we now only have currency, and thus our wealth is vulnerable to “confiscation through inflation”. Translation? Theft by money-printing.

The bankers print more of their funny-money (i.e. currency), and the total money supply increases. This causes prices to go up and the value of our currency to go down. And every time it happens, we lose more of any/all wealth which we choose to store in the bankers’ paper.

Where does the wealth go? Into the pockets of the money-printers (currency-creators). The bankers give themselves all of the newly-created funny-money, thus they don’t lose wealth to inflation – they gain wealth, our wealth. Theft by money-printing. It’s that simple, just ask the Criminals themselves.

Give me control of a nation’s money and I care not who makes its laws.

- Mayer Amschel Rotchschild (1744 – 1812)

Today, Western populations hold only about 1% as much physical bullion as was customary for our populations 100 years ago. Put another way, a century earlier; gold and silver were the primary vehicles of wealth preservation for the Average Person.

A century ago; very few people “invested” in our markets. Why? Were they too stupid? No, they were too smart. A century ago; we had real money, meaning that we were able to keep all of our wages – because there was no theft-by-money-printing. With the workers able to protect their wages, they didn’t need to “invest” their capital.

In other words, people didn’t need to gamble with their hard-earned wealth in the crooked casinos that the Big Banks call “markets”. It was only when we lost the gold standard, lost its protection, and began losing more and more wealth each year to “inflation” that people found it necessary to gamble with their savings. The only way for us to simply break even is if our winnings from our gambling at least equal our losses to “inflation” (banker theft).

By relentlessly stealing our wealth via inflation, the bankers force us to gamble in their rigged markets , where they can (potentially) steal much more of our wealth. Heads they win; tails we lose.

Many people reading this already understand much of this history, and much of the economic fundamentals behind it. Because of this, those readers already have some/most of their wealth protected-and-preserved by converting that wealth to gold and silver.

Yet even many of these people are less-than-content. Why? Because over the past six years, the nominal prices for gold and silver have been in steady decline. These people read over and over in the vacuous pages of the mainstream media that holders of gold and silver have been “losing money” in recent years on their investments.


The basis of this mythology is the product of two deceits from the Corporate media:

  1. Pretending there is “no inflation”.
  2. Always presenting their “analysis” of gold and silver markets using only the USD prices for gold and silver.

Taking these deceptions in order, obviously (1) is the more absurd of the two deceits. Food and shelter costs, the two most-important categories of consumption, are spiraling higher at the greatest rate in our lives, but there is “no inflation”. Right!

Inside the U.S., these inflation pressures have been somewhat muted by the relentless upward manipulation of the U.S. dollar, presently perched at a multi-year high versus almost every other currency in the world. Yet even inside the U.S.; John Williams of Shadowstats.com consistently estimates U.S. inflation between 4 – 8%, and arguably that is a very conservative estimate.

Outside the U.S., we have suffered the full ravages of banker money-printing plus the additional theft of wealth coming from the downward manipulation in the exchange rate of our currencies. The combined effect is an “inflation” rate of at least 15% per year – 15% per year of all our paper wealth.

However, every penny which we have previously preserved-and-protected by converting it to gold and silver has been immune to that theft of wealth. When the deceitful media talking-heads report the nominal declines in gold and silver prices, they never mention the hidden gains we have netted through being protected from “inflation” – meaning the financial crimes of bankers.

This brings us to (2): only presenting precious metals prices denominated in U.S. dollars. Let’s put aside that world for the moment, and only look at gold and silver priced in other currencies.

We see the price of gold peaking (in CAD’s) below $1,900/oz in 2011. In the 5 years since then; it’s fallen to roughly $1,550 (CAD). This works out to less than a 20% drop over 6 years, or an average “loss” of 3% per year. But wait! Add back the 15% per year which we did not lose on our gold and silver due to inflation, and for Canadian dollar holders, you have gained roughly 12% per year by holding gold during this “bear market”.

The argument for silver is less-bullish, in paper terms. The price of silver has fallen roughly 50% in nominal terms, equating to about an 8% “loss” per year – which then flips to a 7% per year gain when we factor in the “inflation” loss we avoided. For Canadian dollar holders, you have ‘only’ been gaining about 7% per year on your silver holdings.

For holders/users of the euro, the math here is similar. Between 2011 and the beginning of 2017; the price of gold went from a high below € 1,400 to a current price of a little over €1,100. This equates to roughly a 20% decline. In silver, silver has fallen roughly 50% in nominal terms, before we factor in inflation.

However, net “inflation” in Europe has been lower over this period since the euro hasn’t declined in value versus the USD by as large a margin as the collapse in value of the CAD (under Stephen Harper). Thus euro-holders have not gained quite as much as CAD-holders over the past 6 years by holding gold and silver.

It is only for USD-holders for whom holding precious metals has temporarily not been a winning strategy, and only because of the extreme, upward manipulation of the U.S. dollar which has mitigated the theft-by-money-printing scam of the Federal Reserve .

The USD gold price has fallen by roughly 40% over the past 6 years, representing a “loss” of less than 7% per year. Factor in annual U.S. inflation of at least 4 – 8%, and for Americans, you’ve only been breaking even on your gold holdings, during this wicked USD bear market for gold over that time. For American holders of silver, who have watched the USD price of silver decline by 2/3 since 2011, you have actually suffered a temporary loss in value on your silver holdings versus holding the (upwardly) manipulated dollar itself.

Let’s frame this in slightly different terms. In the most-bearish currency for precious metals, during the absolute best of times for the U.S. dollar, and the absolute worst of times for gold and silver, holders of the U.S. dollar have done slightly better than holders of gold and silver. In every other currency; during the worst of times for gold and silver, precious metals holders have prospered.

Should rational investors expect “the best of times” to continue for the U.S. dollar, given that the dollar is fundamentally worthless based upon several different metrics ? Probably not. Should rational investors expect the U.S.’s bubble markets to hold their value, following the most-extreme/most-extended “rally” since the Crash of ’29? Probably not. Should rational investors expect “the worst of times” to continue indefinitely for gold and silver, after already six years of bear market conditions? Probably not.

Look at the pumped-up (paper) markets of the U.S., and we see bubbles waiting to implode: the U.S. equities market bubbles, the U.S. bond-bubble, and (of course) the bubble-valuation of the worthless dollar itself.

Look at the massive, unrealized value of gold and silver due to the extreme downward manipulation in prices, and we see opportunity: the chance to hold History’s most-eternal wealth preservation vehicles, at bargain basement prices.

What is the secret of wealth preservation? It is a mind-numbingly simple equation, as explained by Sir Alan Greenspan and the patriarch of the Rothschild crime family: protect your wealth by placing it into the security of gold and silver, or wait for the bankers to steal all of it.

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

Steph 4 years ago at 1:44 PM
Well written Jeff. The Banks and the Governments steal our money left, right and center thru inflation, tax and service fees of all sorts. I am a firm believer in safeguarding our moneys thru precious metals but if it's like everything else, once the Governments and Banks realize that many have taken refuge in precious metals, a tax on wealth will apply. If only there was a way to purchase gold and silver undercover of prying eyes.
Jeff Nielson 4 years ago at 7:59 PM
Thanks for the support Steph!

Yes, I have warned people that "bullion confiscation" is a real possibility, not just in the U.S. but also Canada. If these governments "ban cash" (which is clearly where things are heading), will they really allow us to keep our wealth in bullion?

For people with the financial means, one option is to look to buy/hold gold or silver in off-shore storage facilities, and Sprott Money is one of the companies which offers that service.
C 4 years ago at 1:51 AM
Any chance the Canadian government close its borders to PM's leaving the country, including metals held at Sprott? I have metal stored with Sprott and I'm worried it may be seized by the Canadian government in a SHTF scenario, especially since they stupidly sold their sovereign gold holdings.
Fred Brechtel 4 years ago at 10:01 PM
Jeff, I have appreciated your work. However, I just don't comprehend how you think that gold has hidden gains which have protected against inflation/paper currency devaluation, Here is what I have come up with :
Jan 12, 2012 Gold/CAD $1365
Jan 17, 2017 Gold/CAD $1570
5 year nominal price increase totals 15%, which tracks changes in market prices and exchange rates combined, without distinguishing between them.
Adjust 2017 price for inflation/currency devaluation @ 8%/annum or a loss of 40% over the past 5 years.
$1570x0.60= $942 Canadian in 2012
Therefore REAL 5 year change in purchasing power/wealth of gold in 2012 Canadian dollars (when $CAD/USD was almost at par- Jan 17, 2012=1.1015) IS. . .
$942/1365= 0.69 0r negative -31%. (Using the highest assumed inflation/devaluation rate.) Not small potatoes.

Though holding gold has beneficially mitigated $USD/CAD exchange rate changes for those in Canada, it has minimally compensated for inflation, at least in the 5 year term.
Does not the value of wealth needs be measured in the purchasing power it can generate from sale or trade? In REAL terms now, in 2017, via devalued Canadian dollars, the value is even less in REAL purchasing power terms than is nominally represented by the market price.

Comparatively the US gold price Jan 20 2012 was $1667, and Jan 17, 2017 is $1197 for a 5 year drop of -39%.
Inflation adjusted (using the 8% rate) , the REAL current gold price in 2012 US dollars would be $1197 x 0.60= $718!!!. So since 2012 the holders of gold in the US would have suffered (if inflation was at 8% annually) REAL losses, via inflation adjusted market price in their attempted wealth preservation through holding gold ($718/1667=0.43) OF -57%!
However, the rising value of the dollar is relatively irrelevant internal to the US for most people, unless one purchases offshore investments in other depreciated currencies, or one is an importer, or one can afford to travel. There are some retailers that are rolling back prices somewhat, but by and large, this deflation appears to be minimal at present in essential items (possibly because retailers are not passing on the windfall of lower wholesale prices) . If interest rates increase, or even if the fallout of the recent increase intensifies, there likely will be a much stronger deflation in asset prices via forced liquidations, and defaults, though the value of the dollar will continue to increase- is it the death spiral of Japan or a recipe for Trumps agenda to de facto QE again-even if spent on infrastructure? And then, hyperinflation? You've got me.

Of course if you have been holding gold as wealth preservation since 2001 or so, you would naturally be sitting somewhat prettier, but most have not. It seems the problem with gold is holding it as a preservation of wealth UNLESS it is held for multi-generationally long periods, Not great if you have to liquidate into 'legal tender' to live off of the proceeds for whatever reason.
I really don't know how you have come to the conclusion that holding gold has been effective against inflation in other currencies, especially in the case of $CAD, other than that one still have the gold, or silver. As far as holding for an unrealized gain, who knows when and how and how much that might come about to be for. Seems pretty hard to imagine under the present circumstances, notwithstanding Rob Kirby's 'rational' AU and AG price considerations.
Thanks again
Jeff Nielson 4 years ago at 10:35 PM
Fred, I think that you're missing my point here.

Suppose that you're sitting with $10,000 (CAD) back in 2011, at the top of the gold market (for the time being) when the price was roughly $1,900. If you did nothing with that $10,000 between then and now, it would have been devoured at a rate of about 15% per year, more than cutting in half your actual purchasing power (and thus your wealth). That's a loss of more than $5,000.

Instead, you put that money into gold, at the top of the market. You get 5 ounces of gold for your paper currency. Today that 5 ounces of gold is still worth $1,600 (CAD) even after the TEMPORARY drop in price -- which we will recoup over the long term. On your 5 ounces of gold, that's a temporary loss of $1,500.

But for having the prudence to buy gold -- even at $1,900/oz -- you've saved a $5,000+ loss on your paper. And what we lose on our paper to so-called "inflation" is wealth that we NEVER get back. It's been stolen from us forever.

So even if the bankers were able to continue their price-suppression games forever (which is absolutely impossible), we would still be far ahead by converting our paper to gold.

The only other option to having our wealth stolen by the bankers is to take it and GAMBLE with it -- in the bankers' rigged markets. Betting against the "House" rarely pays off over the long run. Betting against the House in a RIGGED casino never pays off over the long run.
Fred Brechtel 4 years ago at 2:08 PM
Jeff, thanks for your reply. I've always appreciated your personal responsiveness to your readers' comments.
I totally agree about inflation.
However my calculations did not figure forex as a function of inflation. Gold and forex are after all both 'markets'. Inflation is a (hideous) policy.
Few people keep their dollars in dollars. It has been useless when the real rate of return has been negative for GICs, bonds, or almost any interest bearing account for decades now, precisely because of inflation. If a person had held a TSX ETF for the last 5 years, he would have 'made' 24.5%. Even this would not have made up for inflation at 8%/annum or just roughly broke even at 4%. . The Andex charts commonly used in bank brokerages are such a pure deceit, even using 'official' rates of inflation. How much more if ShadowStats parameters are used! In my opinion if we don't use reliable inflation adjusted charts for everything, we really don't know what's going on.
Anyway, I think we are pretty well agreed fundamentally. We all have, since Bretton Woods, as you well know, been thrown into a financial maelstrom of complete predatory variablitiy and instability . Gold IS a very long term constant. However, as the saying goes, "markets can stay irrational longer than many can remain solvent" So the question of weighting time periods when doing calculations such as we have done, re evaluations in terms preservation of wealth in relation to human life spans becomes an important issue in our era of history. (eg. If someone had to liquidate their gold today, after holding it for the last 5 years, or their assets were "deemed sold" in their estate, , they, or their estate, WOULD take a -31% loss in real terms, while ALSO having to pay capital gains. (As you may know Daniel Amerman has done important work in this area ).
Thanks again, and stay well. Fred

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